The boom in online news sites does not mean the UK should relax its media ownership laws, according to an influential House of Lords report. It is even more important that the regulator, Ofcom, and the government should protect and promote quality journalism, it says.

The Lords communications committee warns that the race to pursue advertising cash on the internet is damaging "news gathering", with media companies desperate to cut costs and placing ever greater reliance on news agencies and public relations handouts.

Lord Fowler, the committee chairman and a former Tory minister, added that the BBC had a vital role in maintaining the quality of news and should focus less on giving "talent" such as the TV presenter Jonathan Ross multimillion-pound contracts and more on journalism.

The report, for which the 13-person committee questioned more than 100 witnesses from the newspaper, TV and radio industries, is a rebuke to media executives such as Rupert Murdoch, who believe the advent of online news should herald the relaxation of ownership laws. Murdoch himself told the committee that the UK's laws were "10 years out of date".

But the report states that "much of the news available on the internet and on the new television channels is not new. It is repackaged from elsewhere", making it as important as ever to scrutinise how the media is controlled.

Fowler also added that "with the expansion of the internet, what has not happened is ... a similar expansion of news gathering and journalists being employed to get the news". He believes the internet has reduced the amount of quality journalism available. "In almost every newspaper and TV company, costs are being cut, journalists are being cut, news services are being cut," he said. "It is having a big impact."

He noted that despite all the buzz about online media, most people still said their primary news source was TV and newspapers. As a result, there was still a danger that allowing media companies to merge would give one company or individual too much influence, he said.

Among the 30 recommendations made in the 143-page report, the committee wants to strengthen Ofcom's powers and allow it to launch its own investigations into media mergers, instead of having to wait for a government minister to say a deal may raise public interest concerns.

"There is no reason why Ofcom should not be able to initiate the public interest test and that gives a further safeguard that nothing will get through on the basis of political loyalties or considerations," said Fowler.

The committee also wants to change the way that deals are scrutinised, with the Competition Commission focusing purely on the competition issues of a deal and Ofcom looking at its effect on the public interest. This distinction would prevent the confusion that occurred last year when both the commission and Ofcom examined the threat of BSkyB's 17.9% stake in ITV to the "plurality" of media ownership and came to completely different conclusions.

The public interest test, meanwhile, should be widened to include a new focus on the impact of any deal on the overall market for news gathering in the UK.

The Lords also want mergers or takeovers to be scrutinised on a case-by-case basis, so deals that would not fall under the current rules, such as an online company like AOL or Google buying a newspaper, could be investigated. The committee also calls on the Department for Culture, Media and Sport to look at ways of getting online news aggregators such as Google News to invest in news gathering.

The report comes as Ofcom carries out a review of public-service broadcasting ahead of the switch-off of the analogue TV signal in 2012. That debate has been skewed by revelations that the BBC is using licence fee money to meet the multi-million-pound demands of its top stars. Jonathan Ross, for instance, is widely reputed to have sealed an £18m deal.

Fowler said the BBC should focus more of its energies on news: "One of the first, probably the first, priority of a public-service broadcaster is to provide a good range of news and authoritative news, and people like Jonathan Ross are a luxury after that, if you can afford them."